Tui warns of challenges as it reports 11% earnings rise despite heatwave

HOLIDAY giant Tui has shrugged off a summer hit to its tour operator and airlines division to report a 10.9% rise in annual earnings, but said “challenging” trading will continue.

The group said the prolonged hot weather across the UK and Europe, together with the impact of air traffic control strike action and the Brexit-hit pound combined to send earnings in the tour operator and airlines business down 14.6% to 449.8 million euros (£405.1m).

But an impressive performance in its hotels and resorts arm and cruises business offset the impact, helping group underlying earnings rise to 1.22 billion euros (£1.1bn), with currency effects stripped out, for the year to September 30. Shares in the Tui surged 6% after the results.

The firm admitted it was a “challenging” year for the tour operator and airlines division and said this will continue into 2019.

Winter bookings are 1% lower, while prices are down 2%.

Rivals have also been knocked hard by the heatwave and strike action, with Thomas Cook issuing a series of recent profit warnings as the hot weather took its toll.

But Tui said it expects earnings to grow at least 10% in 2019 as the rest of the business should offset the tough trading in the tour operator and airlines arm.

In the year to September, it booked a 38.7% rise in underlying earnings to 494.5m euros (£445.4m) across its hotels and resorts business while its cruises arm delivered a 26.8% surge in earnings to 324m euros (£291.8m).

On Brexit, Tui reiterated it remains concerned over flying rights in the event of the UK crashing out of the EU without a deal.